Yesterday, Premier Foods said Bob Spooner, group supply chain director, had bought 300,000 shares at 4.45p and Mark Hughes, group procurement director, had snapped up 150,000 shares at 4.86p. Mark Vickery, group change director, also bought 82,947 shares at 5.98p while Iwan Williams, managing director of Bakery, purchased over 1.1m shares at 3.85p.

The wave of director share buying came after the company said earlier this week that its banking syndicate had agreed to defer a covenant test scheduled for December 31 as discussions around refinancing the company's debt continue.

That led to an upgrade from Investec to "buy" from "hold" with a target price of 15p.

"We think the market has under-appreciated the significance of the covenant deferral," said Investec, adding "we think there is a plausible equity value of 20p in six months." Premier Foods climbed 1.9 to 6.4p.

The FTSE 100 jumped 100.56 points - 1.85pc - to 5,545.38 , while the FTSE 250 surged 201.86 points to 10,389.30 after Italy's Senate approved a new austerity package, which also clears the way for an emergency government to replace Prime Minister Silvio Berlusconi.

Schroders was one of the best performing stocks after Deutsche Bank upgraded the company to "hold" from "sell". The broker says it believes "the tougher environment for fund flows and revenues has now been priced in." As a result, the shares gained 54p to £11.63. Elsewhere in the sector, Hargreaves Lansdown perked up 23.7 to 511p.

Banks also peppered the learderboard as dealers found renewed risk appetite. Royal Bank of Scotland put on 1.3 to 22.4p and Lloyds Banking Group climbed 1.6 to 28.8p.

Amec rose 35½ to 934p after Deutsche Bank published a "buy" note on the oil services company. Mark Bloomfield, an analyst at Deutsche Bank, said: "Our continued positive view rests on an undemanding valuation, a strong earning per share growth potential ... and a robust balance sheet."

International Airlines Group gained 7 to 148.7p. Yesterday, the merged British Airways and Iberia said that it had increased growth targets and expected to make an operating profit of around €1.5bn in 2015.

Traders were also cheered by the fact that the airline group said it expected to achieve annual synergies of €450m in 2015, up from €400m previously.

Only four blue-chip stocks ended the day in negative territory. They include Burberry, which fell 14p to £13.77.

Some of the smaller oil explorers were back in vogue after it emerged that ExxonMobil had become the first of the "supermajor" oil companies to venture into Kurdistan. Reports suggested that Exxon, the largest international oil company, signed contracts with the Kurdistan Regional Government last month to explore for oil and gas in six blocks in the region. The move was seen as huge vote of confidence in the semi-autonomous region of Iraq. "If there is no political fallout from the (Exxon) deal, then it could spark a further consolidation phase in the region," said Royal Bank of Scotland.

Consequently, companies with operations in Kurdistan were chased higher. For example, Gulf Keystone Petoleum climbed 33½ to 177¼p and Afren perked up 10.9 to 85.8p.